By Thomas Ahmadifar, Associate Managing Editor

In January of 2013, the United States Court of Appeals for the District of Columbia Circuit threw the legal world into a frenzy by narrowly interpreting the Recess Appointments Clause (RAC) of the United States Constitution.[1]  The Noel Canning v. N.L.R.B. decision placed the National Labor Relations Board (NLRB) at risk of losing its ability to govern, but it also had a potential impact on other parts of the Federal Government.

As I described in an American University Business Law Review Case Analysis earlier this year, Noel Canning might also have hurt the United States Consumer Financial Protection Bureau (CFPB), because its director, Richard Cordray, was also a RAC appointment.  With its director possibly invalid, prior CFPB actions may have become void.  And, any future actions were similarly uncertain because the United States Senate refused to act on Director Cordray’s nomination.[2]   Senate Republicans were holding up the Director’s nomination because they had reservations about the construction of the CFPB.  Particularly, Senate Republicans wanted to replace the directorship position with a board, subject the CFPB to the congressional appropriations process, and establish a “safety and soundness check” for financial regulators.[3]

Since the January decision, there have been two important developments regarding the CFPB’s limbo-status after the D.C. Circuit’s decision in Noel Canning: one legal and one political.  First, on June 24, 2013, the Supreme Court of the United States granted certiorari to review the D.C. Circuit’s ruling on the RAC.[4]   Oral arguments have yet to be scheduled.[5]  Second, on July 16, 2013, the Senate orchestrated a “Filibuster Deal” that pushed through Director Cordray’s confirmation.[6]  In the Filibuster Deal, Democratic Senators agreed not to alter the Senate’s current filibuster rules.  In addition, the President agreed to withdraw several of his original nominees to the NLRB.  In return, Republican Senators allowed through several executive nominations, including Director Cordray whose nomination had been pending for 729 days.[7]

The CFPB gained two principal victories in the Filibuster Deal.  First, the fledgling agency created in the Dodd-Frank Act gained its first official director, whose signature will finally carry clear and inarguable weight.[8]  Second, Senate Republicans agreed to put down their guns pointed at the CFPB’s construction, at least temporarily.  In the wake of the deal, Senator Lindsey Graham (R-SC) admitted that it was wrong for Senate Republicans to hold up the confirmation vote of a valid nominee over substantive objections with the design of the agency.[9]

However, the Filibuster Deal does not mean that the CFPB is out of the weeds just yet.  It appears some members of Congress remain committed to changing the current structure of the Bureau.  In a September 2013 hearing, House Republicans hammered away at Director Cordray for the CFPB’s lack of oversight.[10]  Rep. Jeb Hensarling (R-Tex.), chairman of the House Committee on Financial Services, proclaimed, “The CFPB is arguably the single most powerful and least accountable federal agency in the history of America.”[11]  He continued, “[T]he CFPB is uniquely unaccountable even to itself, since it is fundamentally not an it, not a they, only a he.”[12]

In addition to future political questions, there remains the Supreme Court’s pending review of the Noel Canning case.  Should the Court rule against the NLRB, parties subjected to CFPB actions prior to July 2013 may be able to challenge the validity of such actions on grounds that Director Cordray did not have authority at the time.  This is unlikely due to reasons such as regulated parties trying to build forgoing goodwill with the Bureau, but the risk remains.  Thus, while the Filibuster Deal certainly removed legal and political questions regarding the CFPB’s current authority, the controversial agency may still have to keep its suit of armor on for a while longer on both fronts.